Differential Analysis for Sales Promotion Proposal Kankakee Cosmetics Company is planning a one-month campaign for December to promote sales of one of its two cosmetics products. A total of $150,000 has been budgeted for advertising, contests, redeemable coupons, and other promotional activities. The following data have been assembled for their possible usefulness in deciding which of the products to select for the campaign: Moisturizer Perfume Unit selling price $35 $55 Unit production costs: Direct materials $(12) $(20) Direct labor (8) (10) Variable factory overhead (3) (6) Fixed factory overhead (2) (6) Total unit production costs $(25) $(42) Unit variable selling expenses (2) (3) Unit fixed selling expenses (2) (8) Total unit costs $(29) $(53) Operating income per unit $ 6 $ 2 No increase in facilities would be necessary to produce and sell the increased output. It is anticipated that 40,000 additional units of moisturizer or 30,000 additional units of perfume could be sold from the campaign without changing the unit selling price of either product. Required: Prepare a differential analysis as of November 2 to determine whether to promote moisturizer (Alternative 1) or perfume (Alternative 2). If an amount is zero, enter "0". Differential Analysis Promote Moisturizer (Alt. 1) or Promote Perfume (Alt. 2) November 2 Promote Moisturizer (Alternative 1) Promote Perfume (Alternative 2) Differential Effects (Alternative 2) Revenues $ $ $ Costs: Direct materials Direct labor Variable factory overhead Variable selling expenses Sales promotion Profit (loss) $ $ $
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Differential Analysis for Sales Promotion Proposal
Kankakee Cosmetics Company is planning a one-month campaign for December to promote sales of one of its two cosmetics products. A total of $150,000 has been budgeted for advertising, contests, redeemable coupons, and other promotional activities. The following data have been assembled for their possible usefulness in deciding which of the products to select for the campaign:
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Moisturizer |
Perfume |
|||||
|
Unit selling price |
$35 |
$55 |
||||
|
Unit production costs: |
||||||
|
Direct materials |
$(12) |
$(20) |
||||
|
Direct labor |
(8) |
(10) |
||||
|
Variable factory |
(3) |
(6) |
||||
|
Fixed factory overhead |
(2) |
(6) |
||||
|
Total unit production costs |
$(25) |
$(42) |
||||
|
Unit variable selling expenses |
(2) |
(3) |
||||
|
Unit fixed selling expenses |
(2) |
(8) |
||||
|
Total unit costs |
$(29) |
$(53) |
||||
|
Operating income per unit |
$ 6 |
$ 2 |
No increase in facilities would be necessary to produce and sell the increased output. It is anticipated that 40,000 additional units of moisturizer or 30,000 additional units of perfume could be sold from the campaign without changing the unit selling price of either product.
Required:
- Prepare a differential analysis as of November 2 to determine whether to promote moisturizer (Alternative 1) or perfume (Alternative 2). If an amount is zero, enter "0".
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Differential Analysis |
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Promote Moisturizer (Alt. 1) or Promote Perfume (Alt. 2) |
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November 2 |
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Promote |
Promote |
Differential |
|
|
Revenues |
$ |
$ |
$ |
|
Costs: |
|||
|
Direct materials |
|||
|
Direct labor |
|||
|
Variable factory overhead |
|||
|
Variable selling expenses |
|||
|
Sales promotion |
|||
|
|
$ |
$ |
$ |
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